IBM revenue three consecutive years down the future can you dance again?

In the 1993, IBM faced the toughest test in its history, losing as much as $16 billion trillion, even as the media called it "a foot into the grave".

20 years later, IBM is facing another challenge. Although the 2014 fiscal year still earns more than 12 billion dollars in net profits, its main business has seen a larger decline. In the fourth quarter of 2014, its revenues fell 11.9% from a year earlier, with net profits down 11.3% per cent year-on-year, and even rumours of "a substantial layoff". From 2012 to 2014, IBM's revenue has slipped for three consecutive years.

More worrying, in the Chinese market, last September, the CBRC issued the "Guidance on the application of safe and controllable information technology to strengthen banking network security and Information Construction" (39th), clearly put forward to 2019, the safety of controllable information technology in the banking sector overall reach 75% of the use of the target. There is concern that this will affect IBM, especially the IBM mainframe business in China's most important banking market.

At this delicate time, January 27, IBM released a new generation of mainframe Systemz13 in China. In an exclusive interview with the first financial daily reporter, Ross Mauri, general manager of IBM Mainframe systems global business, Rossmauri said that stripping x86 servers and chips made IBM more focused on High-value products such as mainframes (Zsystem) and small-scale machines (power), These high-value businesses will get more opportunities in the course of a significant increase in the volume of mobile devices.

Can these "High-value businesses" make IBM's lumbering elephant dancing again?

Transformation of the road ahead

In 2014, IBM sold x86 server business to Lenovo to sell its chip manufacturing business to Groffand. The share of hardware in IBM's overall business fell again.

In the quarter of 2014, IBM Systems and technology groups, which host IBM's hardware business, had revenues of only $2.4 billion and fell below 10% per cent of overall revenue.

"IBM will shift its strategic focus to CAMSS (cloud computing, big data analysis, mobile, information security, and social commerce)." IBM says its contribution to corporate revenue has risen to 27% and is growing. 2014, the revenue of this part of the business amounted to 25 billion dollars.

In an interview with reporters, IBM Software and Systems Division executive Vice President Steve Mairs (Stevemills) also confirmed that, according to the new business framework, IBM will be the organizational structure of the adjustment. IBM, for example, has begun to unify the cloud-computing skills of the software, hardware and services departments into a single cloud business unit. However, he says, financial reports that are framed by software, hardware and services will not change at this time.

In Z13 's keynote address, IBM's Greater China president and chief executive Chanda repeatedly referred to IBM's SoftLayer company, which bought 2 billion of dollars last year. The company is the world's largest privately owned cloud-based infrastructure provider. On this basis, IBM changed the business model that it used to build private cloud for the enterprise to provide the public cloud service and build the private cloud model. This is also seen as an important sign of IBM's further expansion of its cloud computing business.

Chanda also mentioned that IBM, using its large data analysis technology, helped Beijing to extend the estimated time range of haze in the next 24 hours to 72 hours, with precision from 10 sq km to 1 square kilometers, during the APEC period.

But Camss alone is not enough to convince people that IBM can dance again. To achieve the overall business recovery, IBM must face more challenges from adapting to regional features to new customer development.

China 2.0

Interestingly, although in China, "Go to IoE" (IoE for IBM, ORACLE, EMC acronym, refers to the international computing domain giant) The slogan is intensified, but in the fourth quarter of last year, IBM in China's revenue fell only 1% (in terms of exchange rate changes and spin-off business impact), The decline was not only lower than the overall revenue decline of 2%, but also lower than the Asia-Pacific region of 2% and Bric 8%.

However, people are still very concerned about the impact of policy reasons on IBM. Especially in the policy of "safe controllable" the quantification of the demand for more and more high today.

"IBM needs to enter the 2.0 era of China. Chanda at the z13 press conference. He described "China 2.0" as, from "making for China" to "creating with China". The implication is that IBM will open more and more technology to Chinese companies and work with Chinese companies to develop products to meet increasingly stringent "discretionary" requirements.

Last October 28, IBM announced the establishment of the China Power Technology Industry Ecological Alliance (hereinafter "the Alliance"). Power is the processor architecture used by IBM minicomputer. Because of its high performance and high reliability, often by the financial sector as the preferred solution to the server, IBM in the enterprise market is a "Trump." In the future, Chinese companies will be able to use the architecture to build their own power chips and servers. IBM Greater China System hardware Vice President Guo Renshong revealed that from Suzhou Sheng Acer development of the power chip the fastest this year will be available. Other Chinese members of the OpenPOWER, such as wave information, will also be able to launch their own developed power servers.

In the z aspect, IBM has opened its cryptographic architecture interface in Z13, and will first carry out the localization of encryption devices in China, and will work with Chinese manufacturers to develop related encryption devices and algorithms.

In fact, because of the advantages of mainframes and minicomputer in terms of stability and computational power, it is unlikely that they will be fully replaced. At the meeting, a bank CIO, who declined to be named, said the CBRC's request for information system autonomy had not yet affected the bank's purchases, and the CBRC's research focused on "low-end servers". "After all, mainframes and minicomputer cannot be replaced to keep the business stable," he said. ”

"In fact, IBM has brought more choices to China." "In view of the growth of domestic server share in the 2014, Guo Renshong said the full opening of power is more important to the" autonomous control "of the Chinese information industry as the x86 processor market remains in Intel's hands. In 2014, Intel's full-year revenue grew 6% year-on-year, while net profit grew by 22%. "From the performance also can see, in the x86 server area profit control in whose hand." Guo Renshong said.

Moving the future

With the streamlining of the hardware department, IBM will focus on expanding the scope of mainframe and minicomputer applications. Last year, IBM released its eighth generation power server. 27th, IBM launched a new generation of mainframe SYSTEMZ13 servers in China. Mr. Roth said the launch of the new product would bring the company's hardware business back into the upward cycle. This is supported by the proliferation of mobile devices.

"The rapid growth of mobile applications has led to a surge in trading volumes. "Today, a user's operation on a mobile phone may bring a four times-fold processing requirement to the background," says Mr Ross. "This means that there is a growing demand for high performance, which increases the demand for mainframes and minicomputer," he said.

Mainframes have higher stability and greater processing power than x86 servers. A z13 server can be virtualized into 8000 Linux servers that can handle 2.5 billion transactions a day. One of the data that can be referenced is that in last year's "double 11" promotions, Alibaba announced a full day order volume of 278 million. On the other hand, Z13 also adds the ability to analyze transaction data in real time, and can analyze the user's shopping habits and provide more business opportunities while trading.

However, over the past more than 10 years, the rapid growth of Internet applications has led to rapid growth of the x86 architecture server and made it a mainstream product. On this basis, the main internet manufacturers have formed a x86 server cluster based on the application environment.

"At present we have set up a special department, with the domestic Internet enterprises to explore cooperation, power and other products into the Internet domain." Guo Renshong says IBM and Google are already working on similar collaborations, and IBM hopes to expand its presence in China to more industries such as the Internet.

(Responsible editor: Mengyishan)